The share price of Sydney Airport Holdings Pty Ltd (ASX: SYD) took off to a seven-month high this morning after the airport operator posted its monthly passenger traffic data for May.
The stock jumped 1% to $7.52 in morning trade as the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index gained 0.6% after management reported a robust 5.6% jump in international travellers last month compared to May 2017.
The result is particularly pleasing as it marked a big rebound from April's traffic result which showed a modest 1.8% increase in international passengers moving through our largest airport at a time when inbound tourism appears to have peaked.
What's more, Chinese visitor numbers have also bounced back from last month as they represented the biggest group of foreigners travelling through Sydney airport.
As much as it's hard for many to acknowledge, our economy is being propped up by China and Sydney Airport is in a great position to benefit from this trend.
However, the latest Australian Bureau of Statistics (ABS) data points to a growing headwind for companies exposed to inbound tourism as short-term arrivals in March and April grew 5% compared to the 12-month average of 6%.
Meanwhile, outbound figures for the two months have jumped 5% versus the 4% average over a one-year period.
What this means is that growth in inbound tourist numbers could soften as more locals are travelling overseas.
Fortunately for Sydney Airport, this shouldn't quite have as big an impact on its bottom line as both locals and foreigners have to use its terminals to enter and exit Sydney. The same can't be said of other companies that are more dependent on international visitors.
These companies include theme park operators Ardent Leisure Group (ASX: AAD) and Village Roadshow Ltd (ASX: VRL), as well as Event Hospitality and Entertainment Ltd (ASX: EVT), according to Citigroup.
However, this doesn't mean clear skies for Sydney Airport either. Rising international bond yields pose a threat as the higher yields will reduce the attractiveness of investing in infrastructure stocks like Sydney Airport and Transurban Group (ASX: TCL).
The more hawkish than expected US Federal Reserve means the threat of higher global bond yields is rising, and that could pose a greater risk to Sydney Airport's share price than traffic numbers.
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